Health Tech Marketing Budget

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Part
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Health Tech Marketing Budget

While few specific budgets or budget allocations could be located specifically for healthtech startups, there are common insights that apply to all startups’ budgets. These include estimating standard startup and first-year costs, including development of the product and opening of the corporate office (if there is one), as well as building cash flow projections through at least the first year. Making sure the legal and regulatory sides are handled properly is also key, as is entering the market with a marketing bang.

Common Startup Costs Differ Depending on the Business & Product Type

  • The Small Business Administration outlines the basic costs that can be expected by most startups, though these will vary depending on whether the company will be a brick-n-mortar company, an online-only company, or a service company. General expenses to account for include (but are not limited to): office space, equipment and supplies, communications, utilities, licenses and permits, insurance, lawyer and accountant, inventory, employee salaries, advertising and marketing, website costs, and market materials (print, email, digital, etc). If the product is a physical product (rather than a digital one), expenses also will include development and inventory costs.
  • Once this list is created in detail (drilled down to the components within each category), estimating how much is needed for each category is next. While some expenses like permits or licenses, as examples have fixed costs, other categories like employee salaries or marketing costs are more fluid and will depend on what expenditures are made (or people are hired).
  • Once the estimates have been added, identify how much capital is needed per month to maintain (and grow) the business and shoot toward that goal (or higher!). Experts note the importance of setting money aside for unexpected expenditures, which can often arise during the course of a startup’s launch.

Expect Startup Costs to Average $30 K

  • Research from the Kauffman Foundation shows the average cost for getting most startups up and running is around $30,000, though this can be cheaper for some companies (and more expensive for others, depending on product type, company type, and other factors). In calculating these costs (as noted in the first subsection of this report), experts at Fundera recommend setting aside at least six months’ worth of expenses from the outset (before launch).
  • Estimated costs for office space vary depending on how much space is needed; a good rule of thumb is to calculate $100 - $1000 each month for office space per employee. Setting up the office with desks, supplies, a break room, and other office areas should run no more than about 10% of the total budget costs. If product inventory is necessary, estimates should be within the range of 17% - 25% of the total budget.
  • Estimated costs for technology and other equipment could run anywhere from $10,000 - $125,000 (or more), depending on the number of employees. Payroll will cost the company between 25 50% of the total budget, with another $1000 - $5000 each year tacked on for professional consultants.
  • Additional costs to consider (and save for) include office space utilities and services (“about $2 per square foot of total office space”), insurance averages about $1200 each year (again, depending on size and type of company), and taxes should be estimated at a 21% flat corporate rate.

App Development Can Be Costly

  • If the product being developed is a mobile app, then development costs must also be included in the launch and first-year budgets. 2018 data from Research2Guidance estimates that the average mobile health app costs about $425,000 to develop, “with nearly half of this expense outsourced to third-party app development agencies or freelancers.” Better-designed apps or those with higher functionality or more frequent use can cost even more to develop.
  • Research shows that 47% of app development budgets were eaten up by external development agencies or freelancers. About 36% of companies spent less than $25,000 on these expenses, while 12% spent more than $500,000 in initial development.
  • Additionally, the costs to be considered must also take into account that this estimate is just for the development of the app, not for the testing of it, or the updates it will need. There are multiple follow-up costs involved in running mobile health apps successfully, and these should be researched in-depth prior to estimating potential total costs.

Build Cash Flow Projections & Establish the Fiscal Year

  • Setting up the initial launch budget and the first-year budget will allow for the estimate of cash flow projections, though these may be higher or lower than actual cash flow during the launch period and first year. Monitoring these projections throughout the year and reducing expenses (or getting financing to cover expenses) is key to ensuring the company stays solvent.
  • Often, the first month of a company’s launch is considered the beginning of their fiscal year, since this is not restricted to January through December, but can be “any series of 12 months.” Establishing this as starting in the same month in which the company started is recommended best practice.

Ensure the Legal & Security Work is Done Before Launching

  • As noted above, some products will require licensure or compliance with regulatory standards, and ensuring that these are not only known, but handled properly, is key. Experts recommend consulting a lawyer that specializes in healthtech products to ensure everything is done properly.
  • Additionally, ensuring that the product is secure and not only compliant with HIPAA, but also safe for patients to add their medical and financial data (if the product requires it). Cybersecurity risks for health data and associated patient financial information are high, especially for mobile apps, so consulting experts and using the best security systems is necessary.

Some Experts Recommend Hiring Marketing Professionals for Launch; Others Recommend Keeping It Cheap

  • Since “marketing has become such a science that any advantage is beneficial,” experts recommend hiring an external team to help develop the launch and initial marketing materials. This is especially true for the initial branding of the company and/or product.
  • That said, other experts recommend keeping the marketing budget as thin and tight as possible between 0% - 10% of the total budget especially in the first year.
  • Notably, with all the marketing tips and best practices available through the internet, with even just a bit of marketing skill, every entrepreneur can handle most of their own initial marketing materials. Some items, like promo videos or giveaways, might require hiring paid help to craft, however.

Additional Helpful Information

  • This highly-comprehensive article from Medium lists more than a hundred excellent sources for information on successfully launching a healthtech startup; it is likely to have an array of information useful to this new venture!
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Health Tech Marketing Budget 1

There are a number of highly-successful healthtech startups in the US today, including such greats as Apervita, PatientPop, FinPay, TapGenes, and Chrono Therapeutics. Each of these companies has seen significant growth since their founding, earned strong funding, and demonstrated a stellar entrance into the market, though none of them offer insights into their marketing strategies for launch or current campaigning. Recommendations for marketing for healthtech launches include: Identifying the target audience(s), having an in-depth understanding of the problem the product solves for each customer, being certain to meet regulatory requirements, not giving away the app (or product) for free to boost user numbers, and presenting opportunity stories to investors.

Successful HealthTech Startups

  • The following is a (short) list of healthtech startups that have proven to be successful in the market. Additional companies can be found via lists from Forbes, RocketSpace, and CIO Review.

Apervita

  • Apervita, founded in 2012, “provides a secure cloud-based platform for healthcare enterprises to share data, analytics, and applications, rapidly delivering insights into workflows.” This startup bills itself as the “world’s fastest growing health analytics and data community and marketplace” on the Angel List. This privately-held company has received well over $40 M in funding from 12 investors over three rounds of investment (all Series A; two early stage VC, one late stage VC).

PatientPop

  • Founded in 2014, PatientPop “is the only complete practice growth solution that empowers healthcare providers to thrive in the digital age.” They are the “first all-in-one practice growth platform that’s HIPAA-compliant, delivers measureable improvements, and is proven to grow your practice.” They’ve received $75 M in funding from four funding rounds (See, two Series A, Series B).

FinPay

  • Founded in 2015, FinPay, they are “committed to solving the affordability crisis in healthcare by enhancing the patient financial experience through pre-care engagement, expanding healthcare financial literacy, advocating for cost transparency, and offering affordable payment options, all while restoring trust in the American healthcare system.” They provide financial management services to help individuals manage medical expenses. This privately-held company has received $1.9 M in funding in one Seed round.

TapGenes

  • TapGenes was founded in 2013 and “is a place for families to collect, save, and share their health information together, to help families care for the ones they love.” Their easy-to-use platform “connects the dots between your family, your lifestyle, and your health by combining them into an easy-to-understand genealogy health tree. Its purpose is to identify health risks before there's a problem so you can take preventive action, manage health conditions, & provide on-demand information in case of an emergency.” They’ve received $20 K in Seed funding.

Chrono Therapeutics

  • This healthtech startup was founded in 2004 “to cause a paradigm shift in the way addictions and diseases are treated.” They offer a “programmable passive transdermal drug delivery (TDD) that offers real-time behavioral support.” They’ve gone through several rounds of funding netting $32.5 M between a Seed round and a Series A round, and netting an additional $50 M in funding in later rounds (totaling $82.5 M).
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Launch & Marketing Strategies for HealthTech Startups

  • The following are a collection of marketing strategies and best practices for successfully launching a healthtech startup. Notably, experts state that, “in early stages, startups need lean strategies to get ahead,” and this is especially true if they are looking for investor funding.

Identify Your Ideal Customers (More Than Just the Patient!)

  • This means not just one customer type but each type of ideal customer that may be the specific audience for the product. For healthtech products, typical customers not only include the patients, but also the medical personnel or insurance companies recommending or paying for the product. Ensuring that each of these ideal buyers is satisfied with the product’s functionality, features, and price is key to success. VentureBeat notes that companies in this space “need to convince three buyers: the user buyer, the technical buyer, and the economic buyer.”

Know What Problem the Product Solves & Focus on That

  • Startups need to not only understand their ideal audiences, but also “must really understand what problem they’re solving” for customers. This specific need (or set of needs) and how the product meets or exceeds expectations for these needs should be clearly articulated and included in all marketing materials.
  • A startup needs to be experts at solving their ideal customers’ main issues, need to know as much about those problems and all the barriers to success they cause as well as the ways the product helps them sail over those barriers and meet their goals/needs.

Be Sure the Product Meets Regulatory Compliance

  • The American healthcare system has a strongly regulated environment, and any company seeking to enter this market should not only understand the regulations that may apply to the products, but also what is needed to approach medical personnel or facilities to sell the product.

Don’t Just Give the App for Free

  • Many startups in this space think that if they give the product away for free to a large selection of customers, that will drive the product’s user data and ratings up so that the product can then be sold to the highest bidder in the pharma or medical community. This is a mistake and will cost the company dearly in the long-run.

Present “Opportunity Stories” to Potential Investors

  • Optimizing messaging to attract potential investors is key to success in this field. Investors are interested in how the product is “gaining traction in the industry” and how it’s changing the game in its niche. Crafting interesting stories can help woo and influence investors.

Social Media Marketing Tips

  • First, choose the best platform(s) on which to advertise based on your target audience. Facebook, Twitter, Instagram, LinkedIn, Snapchat, and YouTube each cater to a different set of demographics, so drill down to which is best for the particular product being sold. On each platform, ensure the company’s profile (or product’s profile) is complete, current, and includes the company / product logo.
  • Publish content regularly (often!) and ensure much of that content offers opportunities for engagement with the audience. Respond to questions or concerns about the product in a very timely manner, and keep things positively-focused. Join niche groups to reach people organically, and use the ad filters to drill down to the best-possible audience for the product.

Email Marketing Tips

  • Email marketing, which is often overlooked by many startups, can show the highest return on investment for marketing dollars. Send out announcements before the launch and collect emails of interested users to notify them upon launch; offer beta testing to some potential clients, or offer free trials or demos where they can be offered.
  • Ensure email subject lines are eye-catching and engaging, keep the email short and in simple language, and make sure to format it with subheadings, small paragraphs, and bullet points to make it most easily readable. Include the benefits of the product within the email and tell them how it will solve their problems without using language that’s clearly trying to sell them. Establish funnels and use them to get conversions, and keep emails to a minimum of 2 – 3 times per week.

Content Marketing Tips

  • Considering that “content marketing generates three times more leads than paid searches,” this cheap and effective strategy is key to include in the marketing plan. Seeking to make an interesting explainer video or a funny introductory video is a strong recommendation; these should be approached from a unique or interesting angle to encourage them to go viral.

Research Strategy

We began by identifying over 70 successful healthtech and healthcare-related startups from lists compiled by Forbes, CIO Review, and RocketSpace. For well over half of these startups, we reviewed their websites and press pages (looking back to their earliest posts) to determine if they had any information available about their launch marketing or early marketing strategies. This did not yield any useful results, so we switched focus to looking for each company’s investor/pitch decks, as well as informational articles or case studies about their launch marketing strategies. Searching through the Angel List, Pitchbook, similar sources, and a wide selection of media sites also did not yield useful results, nor did date-filtered searches for examples of their marketing materials.

We then expanded our search to include marketing materials of all types, as well as recent and current marketing campaigns to see where each company marketed (and markets) and how far back that information went in the hopes of building our own case studies on the companies (as no pre-compiled case studies were found). Again, these efforts yielded no results on any of the 40+ companies we researched. Many startups and specifically those in highly-competitive fields like healthtech, often do not make their marketing strategies, especially for their launches, available to the public, as this would be likely to give their competitors ample information to increase competitive marketing.
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Health Tech Marketing Budget 2

Keeping budget simplistic and spending wisely through prioritization is a best practice for healthtech startups with their marketing budgets. Another is to measure ROI on all marketing efforts and adjust budget allocations based on analysis of that data, while understanding that marketing is a long-term investment and as such, the budget for that might need to increase each year. A third best practice is to follow the trends shown by similar companies (or competitors) with relation to budget allocation and marketing channel selection / focus.

Keep Budgets Simple & Spend Smart through Prioritization

  • Breaking down overall marketing spend into three primary categories (each with multiple subcategories, of course) is recommended: Content Creation, Software Expenses, and Testing and Optimization.
  • Content creation costs include hiring writers, editors, content strategists, designers, and developers to get the most bang for the company buck. Software expenses include email automation, lead scoring software, social media channels, as well as other various platforms used by marketers, most of which are sold through subscription plans paid monthly or yearly. Testing and optimization is often overlooked, but can be the most important category in which to funnel cash; A/B testing, multivariate testing, SEO optimization and testing, and conversion rate optimization are among the needs for this category.
  • Startups typically do not have huge budgets for marketing salaries, so often need to rely on less expensive in-house help (from someone already on the team) or through hiring agencies or freelancers. Finding ways to keep the budget simple and as small as possible while getting the most punch from the materials is key.
  • Prioritizing budget categories (and subcategories) can be tricky, but is necessary, especially with the smaller budgets of most startups. Additionally, tracking success and conversion data on each marketing action is crucial, as is refining and adjusting the budget and allocations based on that data.

Measure ROI & Adjust Budget Allocations Based on Data; Budgets Will Likely Need to Increase Each Year

  • Though there are multiple methods that can be used to determine each year’s marketing budget, two of the most common are goal-based budgeting and ROI-based budgeting. The first type is a customized budget based on which goals the company would like to meet in the coming year including total sales volumes, number of new conversions, individuals targeted and reached, among others. The latter type is based on what type of return on investment the company would like to see 3-to-1? 5-to-1?
  • Ensuring that all marketing efforts are accurately measured and the ROI is calculated for each piece of marketing material is important. This information will help determine where monies might need to be reallocated for better return on investment.
  • Some healthcare providers or companies “make a dangerous assumption” if they’ve had a successful year, often believing that the same marketing budgets and strategies used in the previous year will attain similar goals in the next year. As noted by Healthcare Success, “In other words, they decide they don’t need to spend any more money because they’d like to keep their marketing about the same.” This is not a logical thought process, however, as companies “cannot expect to keep a steady flow [of income] without a continuing investment.”
  • Experts at LabManager state that companies should “treat marketing as an investment,” since it’s a long-term spend for long-term gains. Notably, building the cost of marketing into the product price (and adjusting up or down as the market indicates) can help cover these costs.

Follow Trends for Marketing Budget Allocation

  • Current research on healthcare marketing trends shows that “most healthcare marketers are using a mix of digital and traditional tactics” for marketing, not just one or the other. Notably, there are major differences in which types of healthcare companies preferred (and most used) which channel types.
  • For Healthcare Devices (the most likely category into which this product might fit based on client-given information), nearly 92% choose digital marketing as their primary medium. This is followed by website-based marketing (66.7%), with three types tying for third place (58.3%): digital sales materials, printed sales materials, and content marketing. Statistics on preferred channels for other types of companies within the healthtech space can be found here.
  • Other types of channel marketing popular among health device companies are: social media marketing, digital ads, and meetings/events (all showing that 54.2% of these companies use these tactics); sales representatives and point-of-care marketing was also oft-used (50%) by this group.
  • Digital marketing strategies are near the top of every company’s list with no signs of this slowing down in the coming years. Additionally, many online-only companies (or those offering e-based products) utilize search marketing, like Google Ads and SEO optimization, while others put more money into display advertising. Videos are becoming increasingly popular as marketing content tools, and content marketing is “still a key part of a successful marketing strategy.”

Research Strategy

These best practices were identified through a search for marketing and healthtech budgeting experts’ most notable recommendations. The items selected were noted by multiple experts to be among the top best practices for healthtech companies. Notably, since it was not indicated whether this would be a B2B or B2C product, we included information for both types of products/companies.

Sources
Sources